NEW YORK ( TheStreet) --
Assurant's (AIZ) stock took at hit Wednesday after questions were raised over its the ethics surrounding its force-placed insurance business.
The stock slid down 9 percent, to $36.51, according to the latest trading numbers.
Investors dropped the stock amid reports that regulators will be investigating the ethics around the forced-placed insurance industry as Dodd-Frank Act gears up. An article in American Banker alleged that banks were forcing consumers to pay more for the policies than they might otherwise be charged if they sought out the insurance rates themselves.Assurant is the largest forced-placed insurance provider followed by Bank of America's (BAC) owns an insurance subsidiary, Balboa Insurance Group. The third largest insurer is Sterling Insurance Company. "The real question for investors is whether or not there will be some actions taken by regulators to regulate these insurers more closely," said SunTrust Robinson Humphrey analyst Mark Hughes. "Assurant has a high profit margin, in the low-to-mid 20's per dollar premium. Those profit margins could come under pressure. That business is also two thirds of Assurant's business." The questions surrounding forced place insurance could also affect Bank of America's potential sale of the subsidiary. "Balboa Insurance Group has been rumored to be up for sale by Bank of America in the past," Hughes said. "It adds to the uncertainty surrounding the business. If I were a buyer I would see how Dodd Frank would impact it." The article also alleges that that banks such as Bank of America, Wells Fargo (WFC) and JP Morgan Chase ( JPM) receive commissions or reinsurance fees on the policies they purchase for investors and borrowers. --Written by Maria Woehr in New York.
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